By Lael Oldmixon, Education Trust of Alaska
Sept. 29, 2014
During the college search process, many parents and their college-ready young adults pile into the trusty family wagon and drive from school to school comparing campuses for the right fit. You know the right fit…it’s the right program of study, the perfect location, or just that magical feeling in the pit of the tummy that says this college is “THE ONE.”
There are a few minor imperfections that you may or may not overlook during the courtship with “the one,” but one thing doesn’t escape any parents’ attention: the sticker price. There are two things to know about the sticker price at many colleges and universities. First, the sticker price should never get in the way of applying for the dream school. And second, many colleges are open to negotiation. Financial aid may be leveraged to reduce the sticker price and make the final price much more attractive to future students.
Colleges everywhere will tell you not to let sticker shock keep you from applying. I agree. Whether the “fit list” is as short as one school or as long as 10, the time comes to complete the application, the acceptance letters come back and then the moment of truth arrives: THE FINANCIAL AID PACKAGE.
Sorting through the Financial Aid process can feel like wandering through a giant corn maze while blindfolded. It’s important to stay calm and listen carefully. Every college guide, guidance counselor and financial aid officer will offer this same advice. Fill out the Free Application for Federal Student Aid (FAFSA) on or right after January 1. Apply for every scholarship. Do your taxes every year. And breathe.
Federal Financial Aid packages may be comprised of:
Grants: Federal Pell Grants & Federal Supplemental Educational Opportunity Grants (FSEOG)
Loans: Stafford & Perkins
Work-study: A job you can get as a student where the government pays part of your salary.
Other aid: Scholarships Eligibility for different types of federal grants and loans is determined by the Expected Family Contribution (EFC). Family need is determined when the family completes the FAFSA. The EFC is a number that determines students’ eligibility for federal student aid. The EFC formulas use the financial information students provide on their FAFSA to calculate the EFC. If you’re interested in knowing how the EFC is calculated, here’s a guide. It’s not something most people want to do for fun but just because I’m glutton for punishment I looked up what it would take to have an EFC of zero. Which students qualify for an automatic zero EFC calculation?
The answer: Certain students are automatically eligible for a zero EFC. The requirements for receiving an automatic zero EFC are the same as those for the simplified EFC calculation except for these differences: The income threshold for the parents of dependent students and for independent students and their spouses is $24,000 or less (for an automatic zero EFC) instead of $49,999 or less (for the simplified EFC calculation), and for independent students, those without dependents other than a spouse cannot receive an automatic zero EFC. Note: The income threshold for an automatic zero EFC has not changed from $24,000 for the 2014–2015 Award Year.
Let’s put it this way, if you were the scholarship committee, your kids would win them all. But because you aren’t, it’s important to think of scholarships as a bonus.
So how can anyone be sure that they can afford “the one?” My two cents: leverage the long term investment and tax benefits of saving through a college savings plan. If you don’t have much time left, don’t panic. File the FAFSA, apply for scholarships, and remember that the posted price may be negotiable. And when all is said and done, if the budget doesn’t work out for “the one”, you might want to rethink your affordability threshold and consider whether “the one” is “the ONLY one” or if something less expensive is actually “the one.”
About the Author:
Lael Oldmixon works with the Education Trust of Alaska which offers the UA College Savings Plan, the T. Rowe Price College Savings Plan and the John Hancock Freedom 529 plan. The programs manage more than $6.5 billion for 320,000 accounts. Oldmixon has lived and worked in Alaska since 2006.